Identifying and Understanding Your Firms’ Compensation Schedule

Identifying and Understanding Your Firms’ Compensation Schedule

Recognition and competitive compensations are two key factors that impact recruiting and retention. Employers show appreciation for the work performed by implementing recognition programs that heavily contribute to employee satisfaction. Maintaining competitive compensation systems and schedules is equally as important. Employers who review and update salary structures experience lower turnover, increase morale, and maintain in-house talent. This is accomplished by a company's understanding of current compensation systems. Generally, a company should strive to survey salary data and then make the necessary salary adjustments, unique to each employee, in order to remain competitive.


When understanding and implementing a compensation schedule, four criteria should be analyzed. These criteria include talent recruitment, motivation, internal equity, and annual compensation reviews. This blog post will break down each subject and hopefully help you and your company when taking a closer look at your company’s compensation model.


Talent Recruitment


Acquiring top performers is crucially important to the success of any company. To attract talented employees, with the appropriate experience and skillsets, an organization must establish a competitive advantage. Oftentimes, it can be hard to find talent that is at the standard in which your company requires. 


A recruiter can help with this process by searching through vast amounts of applicants in order to find the right fit. They can also have a salary/compensation conversation with the candidate in order to loop them in on your company’s salary and compensation model. This way, they are more likely to determine what is the right fit for both the employee and the employer. 


By implementing compensation models that include salary structures that pay at or above market rate, employers signal potential employees that the company values talented employees. By implementing a sound compensation practice, the recruitment process is then simplified. Companies that understand the external labor market and present candidates with attractive employment offers tend to experience less downtime when filling open positions.




Under-paying employees can create complacency within the workforce and can eventually result in high turnover. When salary structures begin to lag by comparison to others in the market, it does not take long before employees disengage and look for employment elsewhere. 


Consequently, managers experience difficulty in motivating their employees, and will often times decline. Loyalty between employee and employer can oftentimes become an issue. Employees may utilize their paid time off to initiate job searches and interviews with other companies. If the situation goes unresolved, companies lose both people and profit.


Internal Equity


Growth periods and downsizing events are other examples of the necessity to keep salary structures current. When recruitment activity is significant, an organization must consider the wages of tenured employees. Offering new hires above-market rates while using another standard to compensate existing employees disturbs internal equity and can often create internal rifts. 


Additionally, if due to economic conditions a company imposes a reduction in force, some of the workloads may get redistributed. Often, remaining employees are taxed with additional responsibilities. Companies that fail to update job descriptions and re-evaluate the wage structure often suffer from declining morale and turnover, not only with new employees but senior employees as well.


Annual Compensation Reviews


The ideal way to make certain that salary structures reflect market rates begins with annual, and necessary, compensation audits. This function is typically performed by in-house compensation professionals or contracted to an outside consultant or consulting company. This process involves matching as many jobs as possible to one or more appropriate salary survey(s) to obtain accurate market data. 


Employers then can utilize those data comparisons to test their existing salary structures in order to ensure market alignment. In addition to wage data, companies may also want to consider total compensation. After studying the market, analysts can make recommendations to adjust or increase benefits, add or change bonus compensation plans, or design new incentives for different departments.


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